HS2 2026 start date unrealistic and costs volatile, MPs warn

MPs have warned that the 2026 start date for HS2 services between Birmingham and London may be unrealistic and urged the Department for Transport to be honest about whether the project will have to be delayed by a year.

The Commons Public Accounts Committee (PAC) also hit out at the “volatile” cost of the second phase of the high speed rail route from Birmingham to Manchester and Leeds, noting that estimates are £7 billion over the published budget.

The Department for Transport considers the programme to be on schedule, citing the fact that it recently issued the invitations to tender for major civil engineering contracts for phase 1 on time.

However, HS2 Ltd is only 60 per cent confident that phase 1 will open in December 2026. The Department and HS2 Ltd consider this to be too low. HS2 Ltd has been asked to increase confidence to 80 per cent.

As a result HS2 Ltd is assessing the impact of extending the phase 1 opening date by up to 12 months from December 2026 to December 2027. The Department maintains that delays to phase 1 will not have an impact on the phase 2 timetable. Nevertheless, there remains considerable uncertainty about the phase 2 route, with an announcement due in the autumn.

The MPs also urged the Government to do far more to help local councils cash in on huge economic regeneration opportunities arising from land close to HS2 stations.

The committee said it was encouraging that the Government was starting to plan for regeneration and growth benefits, but added:

On the whole, the £55.7 billion funding package for the project does not include provision for the regeneration around High Speed 2 stations.

Instead, local authorities are required to identify sources of finance and funding. The main exception is Euston where the Department has long term funding to pay for works to enable future development about the High Speed 2 station estimated to cost £417 million.

There was also a warning that skills shortages could hold back HS2:

The extensive programme of infrastructure investment over the next few years is increasing the demand for engineering, project management and commercial skills across the industry. The Department and HS2 Ltd are competing with consulting and engineering firms, and other government projects for scarce skills, which represents a key challenge that will also impact on project costs.

The Government is expected to make a decision about phase 2 of HS2 next month.

The PAC said it was concerned that cost savings would not be delivered in full:

The cost estimates for phase 2 are still volatile. At the time of the 2015 Spending Review, the Department submitted to the Treasury a cost estimate that was £7 billion over the agreed funding of £28.5 billion.

Six months later, following a Cabinet Office-led review of the estimated costs of the programme, the Department and HS2 Ltd had identified up to £9 billion of potential savings.

A large proportion of these potential savings result from HS2 Ltd having applied the more mature and detailed estimates for the unit cost of the viaducts, tunnels and cuttings from phase 1 to the phase 2 plans but it is not clear why these assumptions could not have been applied at an earlier stage.

It remains to be seen whether these planned savings on phase 2 can be delivered without adversely affecting the expected benefits of the programme.